I recently spoke with a St. Cloud businessman. He told me that tax rates are already driving businesses out of the state. He said that increasing taxes is getting almost to the point of preventing new businesses from starting. He said they’d definitely keep established businesses from moving into Minnesota.

[...]

It’s time that Minnesota cut marginal income taxes so we can encourage new businesses to start.

Taxes drive business out of state, deter new businesses from moving to Minnesota and prevent new businesses from starting here. Oh, and they also drive away rich people who pay income taxes.

This sort of anecdotal "evidence" from unnamed businessmen is a staple of the conservative tax critique. A factual response to this canard can rapidly get too wonky for most voters. That's why the anti-tax crowd can get away with it. The best response to these claims is, "Oh yeah? Prove it."

[As I've written elsewhere, high business taxes aren't the best way to raise revenue, because they can get passed on in ways that policy makers have less influence over than, say, income taxes. But contentions like the one above deserve to be challenged.]

I'm writing a more detailed piece on this subject, but for the less wonky, here are some of the reasons you should be very, very skeptical about such claims.

Business relocation is a poor measure of state business climate.

A study on job loss resulting from California businesses fleeing the state found "the shift of employment of California-headquartered companies to other states has been offset by increased employment in the state by firms headquartered elsewhere, with the result that California’s share of national employment has remained roughly constant."

It found that physical business relocation contributed trivially to changes in employment numbers or lost earnings, and that business relocation in the state did not change much over the past decade or so. On the other hand, decisions to expand or start a business may be more strongly influenced by marginal state-to-state differences that affect profitability.

Relocation is a less likely response to increased taxes.

A Texas study looked at the business climate for the state's technology industries. The study noted distinct differences in the ways companies responded to a theoretical major tax increase of 50 percent or more.

In general companies would respond to a major increase in this sequence:

Raise prices

Decrease other costs and decrease employment

Move some property out of Texas

Move entirely out of Texas

However, small technology companies were more likely to raise prices and less likely to move property or decrease employment than larger companies. Larger companies, especially those competing internationally, were more likely to decrease employment than raise prices.

Taxes are only one factor in decisions about location.

Taxes are only one factor is a business's decision to start, expand,
relocate or fold. Since moves are expensive and political and economic
changes can always lead to shifts in tax policy, the benefits of lower
business taxes in another state can be erased relatively easily. Lower
state taxes are typically accompanied by lower state expenditures for
education, infrastructure and highways, and public health. These matter
at least as much in determining an area's economic health and
suitability for business growth.

The Loyalty Effect. The Texas report found that "firms started in Texas are less sensitive to variations in taxation" and a "clear majority of technology firms did not choose the state because it represented the best tax option and for these companies economic factors diminish in relation to state loyalty." This loyalty effect could be related to family roots of the founders, but also to a more nuanced appreciation for cultural and quality of life considerations.

Cost, skills and availability of labor. The education system and openness to immigration (both from other states and nations) should have a positive effect on business location. So, conservatives would say, do lower labor costs, right to work laws and lower workers comp rates.

The Clustering Effect. States that have a solid infrastructure, educated workforce, access to university research and a history of business innovation are more likely to attract similar businesses. Businesses look for suppliers, customers, and peer companies that can be source of ideas, support and potential talent. States can try to attract such businesses by lowering taxes and regulation or declaring their ambition to become the Silicon Valley of Switchgrass, but in fact this type of transformation is very difficult to achieve without substantial investment — and an already established base of businesses in a related field.

For evidence, look at how the so-called pro-business states actually rank as locations for major business headquarters. Those with supposedly attractive business climates are not exactly powerhouses. You might argue many of the "top" 12 have dressed themselves up with gimmicks and incentives to attract businesses, because fundamentally they have severe deficits.

Minnesota, which ranked 39th, has 36 Fortune 1000 headquarters — more than any state in the top 20. The author of the previous year's Pollina survey also remarked in his report: "Today, if a job is relocated out of a state, it is more likely to be moved offshore than to another state."

So, are business taxes driving businesses and jobs out of Minnesota? I'm doing some more research, but in the meantime, if a businessman says so...

If you want a taste of how complex the illegal alien issue is, spend some time in Colorado.

I just read an article in High Country News about a Native American reservation, the Tohono O'odham Nation, that spans the Arizona/Mexico border. It's America's second largest, and its members pass freely back and forth. Unfortunately, so do illegals and drug runners, with dire consequences for the ancient tribe.

Some statistics:

In 2005, more than 1,400 wrecked or abandoned vehicles were towed off the reservation. Another 200 have been left in such remote areas, they can't be reached by tow trucks. Often stolen by narcotics smugglers or coyotes ferrying people across the border, the vehicles are driven hard through the harsh Sonoran desert and left behind when they've outlived their usefulness.

Bicycles, often stolen from tribal members, are also left by immigrants. More than 3,000 have been dumped along the northern and eastern parts of the reservation.

The tribe's unemployment rate is around 42 percent and 40 percent of members live below the poverty line. Members used to be hospitable to migrants, who might do jobs in exchange for food and water. Now, however, the flow is unmanageable and dangerous. As many as 1,500 illegal immigrants cross tribal lands each day.

The tribal police department spends more than half its budget responding to immigrant- and drug-smuggling incidents.

The per capita income in 2000 was $8,000. An O'odham can make $3,000 to $5,000 for just one trip hustling immigrants or drugs.

Colorado public radio reports that in southeastern Colorado, local growers are being squeezed because migrant workers have declined to return after immigrant enforcement in the state toughened. Pumpkins and peppers rotted in fields last fall, and some growers are planting less rather than risk being unable to harvest their crops.

Others are hiring state prison inmates, who are neither experienced farm workers nor likely accustomed to the hard work.

A political consultant and Democratic operative does an anti-Hillary video on his own time. He personally supports Barack Obama's presidential campaign. Problem is, the firm he works for in his day job works for Obama.

Two feminist bloggers quit their blogs to take jobs with the John Edwards campaign. As soon as they are in place, Edwards is criticized for hiring them, and the women are attacked for irreverent posts made before they joined the campaign.

Personally harassed and deciding they are creating an unwelcome distraction for the campaign, both women leave their jobs.

A blogger with Democratic connections looking for a story discovers an ad in progress on the web site of a firm doing work for Mark Kennedy's senate campaign against Amy Klobuchar. The blogger forwards the link to a Klobuchar campaign official, who looks at the ad.

The official is fired. The blogger stops blogging and drops out of sight as potential legal troubles are resolved.

A political consultant, GOP district official and partisan blogger peddles all kinds of half truths and innuendo — on his own, of course. His paid links to campaigns and political consulting firms are of course so irrelevant to his personal work attacking Democrats that I forget why I'm even writing this.

What's fair? It's a fair question when citizens try to sort out tax policy, and there are several different views on display this week.

Joel Kramer of Growth & Justice has an opinion piece in today's Star Tribune that says the Minnesota House proposal to raise income tax rates on a tiny slice of top-earning households would help nudge the tax system closer to overall proportionality — where people at all income levels pay roughly the same percentage of their income in state and local taxes. In 2004, the average for Minnesota households was 11.6 percent of their income in state and local taxes, up from 11.3 percent in 2002, the prior tax year the state Revenue Department did its study of tax fairness.

The fairness discussion starts to break down along political lines because of two irrefutable facts.

Wealthy people pay most of the taxes. The top 10 percent of households paid just over $6 million, directly or indirectly, of the $16.1 billion collected in state and local taxes. The top 5 percent paid $4.3 million of the total, and the highest-earning 1 percent paid about $2 million.

Middle and upper-end earners pay a higher percentage of their incomes in state and local taxes. The 40 percent of households earning $37.5 k to $105.4 k paid in the 12.2 percent range. The 10 percent earning more paid only 10.9 percent. (The only segment paying a lower proportion was people in the $16 k to $23 k range, at 10.5 percent.)

You can see how the proposed new income tax for higher earners would help establish a more equal proportion of taxation across incomes — and put more money in the budget for education, health care and transportation. Conservatives might argue the way to do it is drop everyone else's tax rates.

A Pioneer Press editorial describes high-level findings of the Revenue Department's Tax Incidence Study, admits the system is becoming less fair and comes down on the side of tweaking it in the opposite direction. Sort of.

Fairness? A more
"progressive'' tax system is a worthy-enough goal. Minnesota is dipping
slightly toward its "regressive" side right now. The study shows that a
tax is a tax is a tax - they all add up, no matter who collects them.

A worthier goal, however, is this: a tax system that is
transparent, doesn't discourage enterprise and hard work, and doesn't
encourage automatic growth in the size of government.

If you're in the half-million-and-up income bracket, I seriously doubt a little more tax discourages your enterprise and hard work. Having more money than you know what to do with would seem to be a greater brake. For people who are struggling to get by, taxes may be a bigger disincentive. It's hard to know if the writers are picking one side or both here.

I'll write more on this in the coming weeks. (And a reminder that I also serve as a communications fellow at Growth & Justice.)

Wouldn't you know it. I go on Minnesota Matters today to talk about Minnesota tax policy [here's the link] and Across the Great Divide is blog of the day at The Blotter. But instead of whipping a string of those deep and amusing five-post days, I've been out here in Colorado working my tail off, while my domestic partner hosts a bunch of her siblings. I hate looking like a slacker.

However, the day had its consolations. Wheeling into town for chili fixings, I met Walking Man coming the other way. His gaze flickered over toward me, and I could swear he raised his hand from the catatonic position at his side into a gesture of greeting! This is big. Bigger than getting a link from Kos or maybe even a MacArthur genius grant. I mean, sometimes money falls unexpectedly from the skies, but Walking Man does not bestow his attention outside his inner world.

Could Bloghouse be next? Nah.

*****

My thanks to Joe Bodell for inviting me onto Minnesota Matters. It would've been churlish to disagree on the air with a point he made here about business taxes.

And what of the oft-flogged response that corporations, if taxed, will
simply pass on costs to the consumer? I'm no economist, but neither is
Marty Seifert. Corporations are subject to the almighty dollar, and
may find that twenty-first century consumers, empowered by the
Internet, may not be so willing to abide by those added costs — there's
always someone out there willing to sell the same product for cheaper.

I'm no economist either, but I play one in a blog. Businesses can pass on taxes in several ways, not just through prices, and if they can, they will. The state of Minnesota tax incidence study, which I talked about on the show, assumes this occurs and calculates the effect in its estimate of tax fairness.

Joe is correct that businesses may not be able to pass on the costs of taxation to the customer, but not all products are subject to competition via the Internet, not all customers are consumers, and not all buyers will notice certain incremental changes in prices. Businesses can also pass on the costs to their employees, by reducing what they pay, shaving benefits, not filling jobs, or filling them with cheaper part-time workers. This transfer comes out of the pockets of households, even if it's not in the form of a higher product price paid to the company.

A third way to mitigate a tax increase is to transfer it to the owners in the form of a lower rate of return. For most companies, this is a less desirable option, so management will do what it can to maximize the other options first. Remember, too, that if it's a public corporation, that lower return is partially absorbed by the shareholders — you and me.

For all these reasons, business taxes are regressive — disproportionately affecting people at the lower end of the income scale — regardless of how much progressives may think they are some form of just punishment for evil corporations

Corporations don't act this way to roll off taxes because they're heartless. They do it because it's a rational response.

I agree with most of Joe's post, and I am glad to see other progressive bloggers talking about taxation. He is absolutely right about how progressives should not unwittingly buy into the language of the anti-tax crowd. But I also think we should not reflexively fall into business-bashing. People in businesses may exhibit greed, unethical behavior and other predatory practices, but they also are responsible for innovation, investment and providing more risk averse people a way to make a living.

Businesses are not inherently good or evil; they are simply instruments of human behavior. (Dare I say it? Businesses don't screw people. People screw people.) The world will be better off with more progressives in business as well as more of us who can converse knowledgeably and appreciatively with the business people who help create prosperity.

*****

Today also marked year 32 with my domestic partner, at least officially in the eyes of the state, plus three more on the front end. We celebrate all occasions on a non-calendar basis. Still, I'm chagrined that when she wished me a happy anniversary before heading out the door, it was the first I'd thought of it. But there was no guilt slinging or mad Dagwoodian dash for flowers as a result of my other-mindedness. Besides, I made the chili, and Walking Man almost said hello, so how could she be upset?

The 20-cents-per-gallon gas tax in Minnesota
generated $656 million in 2006 — about one-third of all
transportation revenue. The Legislature last raised the tax in 1988, and there's currently a bill advancing in the House to increase the tax by 10 cents by mid-2008.

An article in Willmar's West Central Tribune — one of the better outstate newspapers — notes that gas tax revenue has been leveling off, even though there is greater pressure on roads from increased miles.

Several years
ago, for example, gas tax receipts grew by up to 3 percent a year, but
officials forecast annual growth of only 1 or 2 percent in coming years.

Federal funds, which come in part from the federal gas tax kicked back to the state, make up a significant portion of our highway spending. But some of that money for roads and transit projects is dependent on matching state dollars, which have been in short supply under the Pawlenty approach of borrowing to pay for roads. Meanwhile, maintenance-related costs have continued to climb, resulting in deferred maintenance on existing roads. About 50 percent of the state's infrastructure maintenance has been
unfunded since 1999.

Even with an estimated $1.7 billion pouring into state, county and
local roads in 2006, there are more highway projects lined up than
there is money. There is between $750 million and $1.2 billion in
annual unmet state highway needs, MnDOT spokeswoman Lucy Kender said.

This slowing of revenue, reluctance to tax, inability to match federal funds in a timely fashion, combined with heavier road and escalating maintenance and repair costs, means Minnesota continues to lose ground against congestion. It's compounded by a general public failure to systematically connect the dots between development patterns, highway congestion and public transit.

What's happening in the under-funded transportation sector is emblematic of the trends in education, the environment and other areas of public investment as well.

Rep. Randy Demmer (R, Hayfield) is trying to get his quips up to GOP standards as he positions himself to oppose U.S. 1st Congressional District Rep. Tim Walz in 2008. "GOP standards" means the sound bite doesn't have to be fact-based or even very plausible. It just has to fit on a bumper sticker. Or two, if you drive an SUV.

Demmer was quoted in the Rochester Post-Bulletin on the proposed 9 percent tax bracket that would apply to couples with
incomes of more than $400,000 and $226,000 for single filers, after
deductions.

"Yes, the people with high wages can afford it, ... and they can afford to move to Florida, too."

True, some people can just pull up roots and leave if their high income doesn't entail showing up for work. But most people in the send-my-check-to-the-new address category are likely to be retired and considering a move to warmer climes anyway. Growth & Justice has found studies of why high income people move and where — and as you would expect, they're more likely to choose places that are warm or have mountains. Some of those states have low taxes, but that doesn't appear to be the prime motivator. Rich people like to live in nice places is more like it.

How many couples at the height of their earning power — business owners, corporate executives, attorneys and other professionals — do you know who will leave their place of business because taxes went up less than four grand on their half-million before deductions? These moves are largely anecdotal or involve threats from businesses run out of pole barns 25 miles from the South Dakota border, where the quality of life drop from a move would not be so drastic.

What Demmer appears to be saying — threatening, really — is that people who are comfortable by most anyone's standards continue to be driven by money. That may be true of some of Demmer's supporters, but I suspect most well-to-do Minnesotans would find that characterization insulting.

The Pioneer Press in a editorial today had a good metaphor for the state's approach to transportation funding under Gov. Pawlenty:

The governor continues to oppose a gas tax hike, unchanged in
Minnesota for almost two decades. But he has borrowed extensively for
road and bridge projects that used to be built on a pay-as-you-go
basis. How is credit-card road construction more responsible than
increasing the user fee?

Yeah, he's putting road construction on the credit card and we're not even getting miles.

*****Imagine your home baseball team managed by someone whose favorite slogan is “A walk’s as good as a hit!” Asked about a plan to make the playoffs, he says, “Same as last season.”

Except last season your team dropped in the standings.

For most of this decade, that’s how Minnesota has been running its state government — like a former winner now content to finish in the middle of the pack. The reason for these diminished expectations, we are told, is the cost of government services had been growing out of control. Now, we must “live within our means.”

Far from living beyond our means, we have been neglecting the “farm system” of education, health care and transportation that has been the long-time source of our economic success. (The right measure of government spending is proportion of personal income going to state and local taxes and fees. This decade, it's averaged about one percentage point below historic levels.) Meanwhile, conservative team management has been advertising how they held down ticket (tax) prices, as if that will bring in more fans and more revenue. (Of course, they've also tacked a dollar on all concessions, serve cheaper hot dogs and removed the relish, onions and sauerkraut from the condiments station.)

A team that doesn't invest in developing its own talent ends up paying more for it eventually. New York has its A-Rod and Jeter. Minnesota has Mauer and Morneau. Would you trade?

The Twins have been relatively successful not because they spent wildly but because they invested wisely. Putting money into a minor league system and drafting unproven players doesn’t guarantee results, but it’s a better vision than "next season, just like last season."

Some fans of team Pawlenty claim we can use the so-called budget surplus to soften residential property tax increases or to spend on other high priorities. But that's like bringing in an overpriced free agent for a season. It just delays dealing with the real shortcomings.

No team can rebuild power, speed, pitching and defense all at once, and no government will be successful trying to address every need as a top priority. But there's a clear connection between investing, winning and growing revenue to invest some more. Simply watching expenses and limping from year to year is how you get stuck in the cellar.

More than 160,000 military women have been
deployed to Iraq and Afghanistan, and one of every 10 U.S.
soldiers in Iraq is female. A long article in the NYTimes Magazine today describes how a significant number of these women soldiers are suffering from post-traumatic stress disorder, fueled by a toxic mix of sexual harassment plus the uncertainties of a war where troops in "support roles" can be as vulnerable as those on combat patrol.

Much of what we know about trauma comes
primarily from research on two distinct
populations - civilian women who have been raped
and male combat veterans. But taking into
account the large number of women serving in
dangerous conditions in Iraq and reports
suggesting that women in the military bear a
higher risk than civilian women of having been
sexually assaulted either before or during their
service, it's conceivable that this war may well
generate an unfortunate new group to study -
women who have experienced sexual assault and
combat, many of them before they turn 25.

[...]

A 2003 report financed by the Department of
Defense revealed that nearly one-third of a
nationwide sample of female veterans seeking
health care through the V.A. said they
experienced rape or attempted rape during their
service. Of that group, 37 percent said they
were raped multiple times, and 14 percent
reported they were gang-raped. Perhaps even more
tellingly, a small study financed by the V.A.
following the gulf war suggests that rates of
both sexual harassment and assault rise during
wartime. The researchers who carried out this
study also looked at the prevalence of PTSD
symptoms - including flashbacks, nightmares,
emotional numbing and round-the-clock anxiety -
and found that women who endured sexual assault
were more likely to develop PTSD than those who
were exposed to combat.

The Department of Defense established a formal prevention and response program, with new rules enabling victims to report
sexual assaults confidentially so they can get access to medical
treatment and counseling without setting off an
official investigation.

The results could be
viewed as both encouraging and disturbing:
comparing figures from 2005, when the restricted
reporting began, to those of 2004, the number of
reported assaults across the military jumped 40
percent, to 2,374. While victims may be feeling
more empowered to report sexual assault, it
appears that the number of assaults are not
diminishing.

With no-fault reporting and an already low incidence of upheld investigations, why would assaults decline?

There was a
pervasive sense among [female Iraq veterans] that reporting a
sexual crime was seldom worthwhile. Department
of Defense statistics seem to bear this out: of
the 3,038 investigations of military sexual
assault charges completed in 2004 and 2005, only
329 - about one-tenth - of them resulted in a
court-martial of the perpetrator. More than half
were dismissed for lack of evidence or because
an offender could not be identified, and another
617 were resolved through milder administrative
punishments, like demotions, transfers and
letters of admonishment.

Women may be more accepted in today's military, and women enlist knowing they are joining a macho, hypersexualized culture, but they may still be surprised by their vulnerability.

Many of the women I spoke with said they felt the burden of having to represent
their sex - to defy stereotypes about women somehow being too weak for military
duty in a war zone by displaying more resiliency and showing less emotion than
they otherwise might. There appears to have been little, too, in the way of
female bonding in the war zone: most reported that they avoided friendships
with other women during the deployment, in part because of the fact that there
were fewer women to choose from and in part because of the ridicule that came
with having a close friend. ''You're one of three things in the military - a
bitch, a whore or a dyke,'' says Abbie Pickett, who is 24 and a combat-support
specialist with the Wisconsin Army National Guard. ''As a female, you get classified
pretty quickly.''

[...]

None of this
behavior was particularly new to her; it was
life as she knew it in the military. Yet in a
war zone the effect seemed more corrosive. ''The
real difference is that over there, there's
never a break from it,'' Pickett told me. ''At
home, you can go out with your girlfriends and
get a beer and talk about the idiots who were
cracking jokes. Over there, you're a minority 24
hours a day, seven days a week. You never get
that 10 minutes to relax or even cry. Sometimes
you just need to let it all out.''

The military's supporters are quick to dispute claims that its members are below average intellectually or socio-economically. But there are indications that a relatively higher proportion of recruits have suffered abuse as children. Throwing together men and women with this background in a hierarchical system where superiors must be obeyed without question can compound the hazards and stresses.

Tina Lee, a
psychiatrist at the V.A. Palo Alto Health Care
System in California, works with both male and
female PTSD patients. She points out that
traumatic experiences in childhood may increase
the risk of developing PTSD when exposed to
another trauma in adulthood. Experiencing
childhood trauma can also produce opposing
behaviors in adult men and women. Male survivors
of childhood abuse are more likely to act
aggressively and angrily, while some women
appear to lose their self-protective instincts.
A female patient, she says, once offered up an
apt description of this tendency to end up in
hurtful situations, saying that her ''people
picker'' had been broken.

''So you have young women joining the military
who have the profile of being victimized, who
don't have boundaries sometimes,'' Lee went on
to say. ''And then you have a male population
that fits a perpetrator profile. They are mostly
under 25, often developmentally adolescent, and
you put them together. What do you think will
happen? The men do the damage, and the women
get damaged.''

I couldn't read this without reflecting on the impact of openly admitting more gays in the military. Presumably, it would reduce the number of men likely to harass women, but would it really encourage more tolerance and reduce sexual aggression?

I was going to transcribe two long paragraphs from Joshua Ferris's Then We Came to the End to show you how good he was. But then I discovered two important things.

During a day that included guitar playing, convoluted bike riding, stalking a homeless person and coverting a section of HVAC ductwork into a driveway entry sign, I managed to majorly sore-i-fy the edge of my spacebar thumb. (The foregoing sentence alone was worth 36 owies.)

After beer and wine, I can still type my own thoughts reasonably well. But transcribing? Forget it. (Actually, I'm not that great with my own thoughts. I'm just more patient.)

So you should take my non-typed word for it. A funny, touching novel, in the best sense of the word.